TOKYO: The Nikkei average is set to edge lower in early trade on Tuesday, snapping a five-day rally, before trading in a narrow range as investors remain cautious about temporary overheating in the market after the index touched the 10,000-mark the previous day for the first time in two months.
Analysts said the Tokyo market is overheated after adding about 4 percent over the past five days, and that domestic investors may take profits while foreign players could stay on the sidelines until they see how US stocks perform following a long weekend in the United States.
Foreign investors, mainly Asian participants whose buying led gains in the Tokyo market day before, may continue, but volume may be subdued as they want to see the outcome of major global macro data such as US jobs data, released this Friday, analysts added.
Before trading started on Tuesday, foreign investors likely placed a net buy order of 4 million Japanese shares, traders said.
"Since European shares were strong, sentiment is not that bad, but profit-taking may cap gains today as the market is overheated," said Yumi Nishimura, a senior market analyst at Daiwa Securities. "The index may stay near yesterday's close."
On Monday, European shares extended a winning run to six sessions, as worries about Greece receded further, though volumes were low with Wall Street closed.
The benchmark Nikkei ended up 1.0 percent at 9,965.09 after rising as high as 10,005.75 on Monday, trading above 10,000 for the first time since May 2. The broader Topix index gained 1.2 percent to 864.11.
Copyright Reuters, 2011
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